A Federal Business Number (BN) is a 9-digit number which Revenue Canada Agency assigns to a business such as a corporation, a sole proprietorship or a partnership in Canada. Each corporation is assigned only one Business Number but multiple accounts can be opened up under this number.
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What is the Purpose of the Federal Business Number
The Federal Business Number is needed for you to file the federal tax return for your company and Revenue Canada will issue the Federal Business Number (the base number) for a corporation immediately upon incorporation and send notification of this number to the registered office address of the corporation.
The Federal Business Number (BN) consists of three sections. The Nine Digit number represents your main base Business Number. This number stays the same no matter how many types of accounts you have with the Canada Revenue Agency.
What Accounts can Be Opened under the Federal Business Number
Accounts can then be opened up under this Business Number for GST/HST, Payroll, Import/Export and Income Tax.
Each GST/HST, Payroll, Import/Export and Income Tax account can have more than one account for different businesses. Refer to the following Revenue Canada Agency Guide for more information about all of the accounts: The Business Number and Your Canada Revenue Agency Program Accounts.
E X A M P L E S
This is an example of a Federal Business Number for a Corporation and the Account Number Designations
|
Type of Account |
Nine Digit Main Number |
Program Identifier |
Reference Number |
|
Income Tax |
123456789 |
RC |
0001 |
|
Import/Export |
123456789 |
RM |
0001 |
|
Payroll |
123456789 |
RP |
0001 |
|
GST Acct #1 – Lawnmowing Business |
123456789 |
RT |
0001 |
|
GST Acct #2 – Snowploying Business |
123456789 |
RT |
0002 |
The above example relates to accounts for one corporation. You will see from the above chart that the main Federal Business Number is always the same because we are dealing with one corporation. A corporation does not have to have all of these account numbers. For instance, the corporation would want to have an income tax account since all companies have this but if the company is not doing any importing or exporting it would not need an Import/Export Account. If the company does not have any employees it would not need the Payroll Number.
There are situations where a company would want to have more than one account for a particular matter. The example above shows two GST accounts. Let us say that the corporation called 999999 Ontario Inc. has two businesses. One business does landscaping and is called John’s Landscaping Business and the other is called John’s Snow Removal Business. The owner of the business, John, may wish to separate the GST he pays against John’s Landscaping Business from the GST he pays for John’s Snow Removal Business. In this case, he would apply to Revenue Canada Agency to have two GST numbers. The first number would be RT 0001 and the second would be RT 0002. These numbers are considered extension numbers to the main 9-digit Business Number.
The letters “RT” indicates that these accounts are for GST and the 0001 and 0002 refer to GST account no. 1 and GST account no. 2. If John did not wish to separate his GST account for each business he could register for just one GST number being 0001 and put all of his GST for both businesses under one number.
Since it is not necessary to have a GST account unless your business is making more than $30,000 per year gross, you may not wish to register for a GST number. If you are going to have employees then you would register for a Payroll account.
You should always speak to your accountant before registering for these accounts to make absolutely sure it is necessary since once you have registered you will be responsible for reporting to the government on a regular basis and this can become onerous if there is no immediate need for registration. An example of this is that if you register for a GST number at a time when you are making less than $30,000 gross profit per year you will be expected to charge GST from the date of registration regardless of whether you made $25,000 or $5,000 by virtue of the fact you registered voluntarily. On the other hand you cannot charge your clients and customers GST without being registered for a GST number.
When you make payments to the government the money will go to the account you designate using the two-letter program identifier and the four-digit reference number.
You can register your business for any one of or all four of the major program accounts by completing one form. You do not have to register for each account at the same time and can add an account later on. If you wish Resources for Canadian Business Owners to assist you with Federal Business Number registration we will be glad to register you for any or all of the four accounts.
If your business expands, you might have separate offices in different cities and need separate Payroll Numbers for each one. Your first account number would be RP 0001 and the next RP 0002, and so on. The “RP” in the number refers to it being a Payroll account.
The four different extension accounts currently being grouped under the main business number are as follows:
RC – Corporation income tax account
RP – Payroll Account
RT – GST/HST account
Each sole proprietor, partnership or corporation will get only one Federal Business Number. Federal Business Numbers can also be obtained for trusts, clubs and charities. Further the trustee or administrator of a registered retirement savings plan or a registered retirement income fund who has to open up a payroll deductions account will need a Federal Business Number.
Opening an import/export account before you are ready to import/export goods into Canada will avoid delays at the port of entry.
You should open a payroll account as soon as you know when you will have employees, so that you can make regular deductions for them and remit tax and other amounts on time.
Business Numbers for Sole Proprietorships
If an individual registers a sole proprietorship the government will issue one Business Number to the individual. Therefore the Business Number is not assigned to the sole proprietorship. It is assigned to the individual.
You should be aware that you cannot register for a Federal Business Number for a sole proprietorship without also registering for at least one account. i.e. GST/HST, Payroll or Import/Export Account.
If your reason for registering is that one of your clients is looking for an official tax number to confirm that you have a valid business, the number that Revenue Canada has indicated that should be provided would be your social insurance number. You can also provide a copy of your Master Business Licence which would have a Business Identification Number assigned to it as well and confirms you have registered your sole proprietorship.
If the individual has more than one sole proprietorship then he can register for more than one account under the same Business Number. He can have separate Payroll accounts for each sole proprietorship or he can combine them.
If an individual registers a sole proprietorship and he or she registers for a GST number he or she will be given the extension number RT 0001.
If the business is later dissolved and he starts up a new sole proprietorship he would use the same Business Number since only one Business Number is provided to an individual no matter how many sole proprietorships this individual has or whether one or the other has dissolved.
Register a Sole Proprietorship
What Happens If I transfer the assets from my Sole Proprietorship into a Company
As your sole proprietorship business grows you will come to a time when it is better to incorporate in order to save tax dollars since money earned through a sole proprietorship is taxed to the individual personally. In this case, you will need to close down your sole proprietorship business, transfer the assets and liabilities to a new company and obtain a brand new Business Number for the corporation. A corporation is considered an entity on its own and therefore needs its own Business Number.
Business Numbers for Partnerships
A Canadian partnership is issued a Business Number. It is not issued against the individual partners. When the partnership is dissolved the Business Number would be cancelled since it cannot be used for another partnership.
What Information Do You Need to Know in Order to Register for a Business Number (GST, Payroll, Import/Export, Tax)
There are numerous questions that the government will ask you in order to provide you with these account numbers depending on which account you wish to register for. Some of the important questions you will be asked are:
Financial Year end
Sole proprietorships have a financial year end of December 31st since this coincides with the cut off date for filing your personal tax return. All profits and losses of a sole proprietorship are recorded as part of your personal tax return.
Companies must have a financial year end set within 53 weeks of incorporation and it will fall at the end of a month. For example, if you incorporated your company on April 20th, 2009 then you can have a financial year end of May 31st, June 30th, July 31st, September 30th and so on up until March 31st, 2010.
A financial year end for a company can end on January 31st, the last day of February, March 31st, April 30th, May 30th, June 30th, July 31st, August 31st, September 30th, October 31st, November 31st or December 31st. The reason for why February would be the last day of the month in that year is that some years there is a leap year which ends on February 29th.
If you are not sure what your financial year end should be it would be a good idea to speak with an accountant. If you are located in Ontario and need to speak to an accountant feel free to contact Resources for Canadian Business Owners Inc. for a referral.
If you do not know in advance what the financial year end of your Company is going to be it would not be a good idea to register for GST at that time because if you do not provide Revenue Canada with a financial year end at the time of registering they will insert December 31st. This will result in a big hassle if you want to change this later on because you will need to obtain permission from the Revenue Canada Agency. Therefore, ensure you have your financial year end ready when you request registration. If you do not wish to speak to an accountant about this then pick the financial year end that is just prior to your incorporation date. For instance if your company was incorporated on February 15th you would pick the financial year end January 31st or if your company was registered on October 29th you would pick the financial year end September 30th.
Copy of Articles or Registration Document
You will be required to provide a copy of the appropriate registration for the business such as a copy of the Articles of Incorporation for a company, a copy of the Business or Trade Name Registration for a sole proprietorship or a copy of the Partnership Registration for a partnership.
Obtain a Copy of Articles of Incorporation
Social Insurance Number
Whether you are registering for an account for a corporation, partnership or sole proprietorship, you will be required to provide your social insurance number. This is how the government connects you personally to a business. In the case of companies, all directors and officers will be required to provide their social insurance numbers.
Completing Your GST/HST Return
The government sends out these returns automatically and if you do not receive yours you will need to call them and request new copies. These are not returns that can be located online. These returns are specifically created by Revenue Canada for your business and have certain dates already filled in.
You should keep in mind that even though a business needs to charge GST on products and services and you will remit that amount to Revenue Canada Agency, you will also be allowed to subtract any amounts of GST that you have paid for services and products paid for with respect to your business. In the first year of business, if you have more expenses than profits, you may be able to obtain a refund of GST since you may pay more GST than you actually claimed. It works like this:
GST Charged on Products and Services that were sold through the business
Minus
GST Paid for Products and Services for the business.
Total – (this can be a positive or negative number)
If it turns out you paid more GST than you actually charged your customers you will be entitled to a refund.
Goods and Services Taxable
If you are a GST/HST registrant and you provide goods and services that are taxable at various amounts, you have to charge either GST or HST as the case may be for your province or territory. The Canada Revenue Agency does provide a summary of the GST/HST Rates. Refer to the following guides for more information about registering for a GST/HST Account:
General Information for GST/HST Registrants
Doing Business in Canada – GST/HST Information for Non-Residents
Below is a breakdown showing what should be charged depending on the province:
|
Province |
Tax |
Percentage |
|
Alberta |
GST |
5% |
|
British Columbia |
GST |
5% |
|
Manitoba |
GST |
5% |
|
New Brunswick |
HST |
15% |
|
Newfoundland |
HST |
15% |
|
Nova Scotia |
HST |
15% |
|
Northwest Territories |
GST |
5% |
|
Nunavut |
GST |
5% |
|
Ontario |
HST |
13% |
|
Prince Edward Island |
GST |
15% |
|
Quebec |
GST |
5% |
|
Saskatchewan |
GST |
5% |
|
Yukon |
GST |
5% |
Rates Updated Feb/2017
Refer to the Revenue Canada Agency website for current rates and a summary of rate changes throughout the years: GST/HST Rates Table
What Happens When Your Province or Territory Goes from Charging GST to HST
If you already have a GST account open for your business and your province, such as Ontario and British Columbia, is going from GST to HST, it is most likely that the government will not be expecting you to re-register. There will be a cut-off date for when the change will occur and all returns will need to be filed and up-to-date as of the end of the period just before the change. Then a new return will need to be filed from the effective date of the change for HST in the future.
Register a Foreign Business for HST or GST
All foreign businesses registered in Canada must have a Federal Business Number and register for HST/GST. Foreign companies will be required to collect HST/GST on all sales in Canada in the case where the foreign company’s Worldwide sales are over $30,000. The foreign business must first be registered in Canada before it can apply for this number.
Register a Foreign Business in Canada
Opening up a Payroll Account with Revenue Canada
If your business is going to have Canadian employees you will be required to have a Revenue Canada Payroll Account. For more information about opening this account refer to:
What is a Payroll Program Account?
Opening up an Import and/or Export Account with Revenue Canada
If you are planning on exporting or importing products into Canada you will be required to provide Customs with your Import Account No. For more information about this account refer to these links:
Step-by-Step Guide to Importing Commercial Goods into Canada
Step-by-Step Guide to Exporting Commercial Goods from Canada
Confirming a GST/HST Account Number
Businesses cannot charge HST/GST unless the business is registered. The HSt/GST Account number is supposed to be displayed on all invoices rendered by the business. If you have some concerns that the business you are dealing with is charging HST/GST without being registered there is a way of finding out if the business is registered. Refer to this page for how to look up a business and determine if they are registered:
Confirming a GST/HST account number
Calculating GST or HST
Below is a link to a percentage calculator. You can determine what the GST or HST amount is on a base amount OR you can determine what the GST or HST is on a gross amount (that already contains the GST or HST amount within it).
Calculate GST or HST on an Amount OR Reverse Calculate GST and HST
Here is another very cool Calculation Chart which allows you to calculate any amount of tax, i.e. 8%, 7%, 22%, whatever AND it also provides for you to De-calculate tax, i.e. figure out how much of a certain percentage of tax was charge on an item. This one is my favourite. Scroll down to the bottom to see how you can de-calculate tax:
Calculate any Tax Percentage OR De-Calculate Tax Percentage
Have fun with these charts. They sure do make life easier.